(ALNY) Alnylam Pharmaceuticals Analyst Maintains Neutral Rating on Shares

We have maintained a Neutral rating on Alnylam Pharmaceuticals, Inc (ALNY) with a target price of $7.00 per share.

Alnylam Pharmaceuticals Inc. is a biopharmaceutical company developing novel therapeutics based on a biological breakthrough technology known as RNA (Ribo Nucleic Acid) interference (RNAi). Alnylam is currently utilizing this know-how to build a pipeline of drug candidates for the treatment of a wide array of diseases.

Alnylam Pharmaceuticals Inc.’s second quarter 2011 loss of 33 cents per share was narrower than the Zacks Consensus Estimate of a loss of 37 cents per share and the year-ago loss of 35 cents per share. Lower operating expenses led to the narrower loss despite lukewarm revenues in the quarter. Revenues for the reported quarter fell 22.6% from the prior year to $20.6 million. Revenues were however barely above the Zacks Consensus Estimate of $20 million.

We like the company’s newly launched “5X15” initiative and are pleased with the progress of the company’s pipeline. Alnylam’s core product strategy, Alnylam 5×15, is aimed at developing RNAi therapeutic products for the treatment of genetically defined diseases addressing major unmet medical needs.

Alnylam expects to have five such RNAi therapeutic programs in advanced clinical development by the end of 2015. Important among these are ALN-PCS (for hypercholesterolemia), second generation ALN-TTR (a hepatitis C compound), and ALN-HPN (refractory anemia). The other two programs are expected to move into clinical development in the third and fourth quarters of 2011.

Furthermore, the company is developing ALN-RSV01 for the treatment of respiratory syncytial virus, or RSV, infection; ALN-VSP for the treatment of liver cancers; and ALN-HTT for the treatment of Huntington’s disease, or HD, through existing or future partnerships.

We believe the second half of this year and 2012 will be an important period for the company due to significant clinical catalysts. Data from an early stage trial of ALN-TTR01 (a systemically delivered RNAi therapeutic that employs a first-generation LNP formulation) to treat transthyretin (TTR) mediated amyloidosis is expected to be presented in the fourth quarter of 2011.

Data from an early stage trial of ALN-PCS is slated for presentation in the second half 2011. Data from a mid stage study of ALN-RSV01 in RSV-infected lung transplantations is expected in 2012.

Alnylam also generates revenues from research collaborations, grants, and licensing of the RNAi technology outside its core focus area. Alnylam has formed major alliances with leading companies including Merck, Inc. (MRK), Roche (RHHBY) Biogen Idec (BIIB), Medtronic (MDT), Takeda, Kyowa Hakko Kirin and Cubist Pharmaceuticals (CBST).

The alliances with major players further validate the potential and viability of the RNAi approach. Alnylam has a 45% stake in Regulus which is a joint venture formed in partnership with Isis Pharmaceuticals (ISIS). Regulus is engaged in research in microRNA and has entered into major partnerships with GlaxoSmithKline (GSK) and Sanofi Aventis (SNY).

We are also comfortable with the company’s current cash position, which allays concerns regarding its cash-burn rate.

In September 2010, Alnylam’s long time collaborator, Novartis (NVS), opted to end a 5-year alliance with Alnylam. With the end of the Novartis alliance, the company’s need for service based activities decreased. As a result Alnylam announced a corporate restructuring with an approximate 25% reduction in the overall workforce.

Further In November 2010, Roche discontinued certain activities in research and early development, including their RNAi research efforts. However, the license and collaboration agreement with Roche continues. Until September 2010, a substantial portion of Alnylam’s total net revenues comprised collaboration revenues from its strategic alliances with Roche, Takeda and Novartis. Though without any immediate effect, we believe the discontinuation of some activities under the Roche and Novartis research and collaboration deals will rob Alnylam of some potential future milestones and royalties.

We prefer to remain on the sidelines and await further visibility on the clinical progress of the pipeline as well as the company’s ability to enter into new large partnerships.

ALNYLAM PHARMA (ALNY): Free Stock Analysis Report

BIOGEN IDEC INC (BIIB): Free Stock Analysis Report

CUBIST PHARM (CBST): Free Stock Analysis Report

GLAXOSMITHKLINE (GSK): Free Stock Analysis Report

ISIS PHARMACEUT (ISIS): Free Stock Analysis Report

MEDTRONIC (MDT): Free Stock Analysis Report

MERCK & CO INC (MRK): Free Stock Analysis Report

NOVARTIS AG-ADR (NVS): Free Stock Analysis Report

SANOFI-AVENTIS (SNY): Free Stock Analysis Report

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